The open pit copper mine Cobre Panama in Donoso, Panama on Dec. 6, 2022.Abraham Teran/The Associated Press
The election of a pro-business president in Panama is raising hopes that Canadian miner First Quantum Minerals Ltd.’s FM-T pained prospects in the country might improve.
First Quantum’s Cobre Panama mine was ordered to close late last year by outgoing president Laurentino Cortizo after the country’s Supreme Court ruled that its mining contract was unconstitutional. Mr. Cortizo’s term ends on June 30.
The winner of Sunday’s election was José Raúl Mulino. His campaign focused heavily on various initiatives aimed at boosting the economy. He became a candidate late in the campaign when former Panamanian president Ricardo Martinelli was barred from running after being convicted of money laundering.
Sam Crittenden, an analyst with RBC Dominion Securities Inc., wrote in a note to clients that the election of Mr. Mulino is a good outcome for First Quantum given his history of supporting the mining industry. However, since Mr. Mulino was careful in his commentary around First Quantum during the campaign, there is still much uncertainty around the fate of the mine. Work still needs to be done “to improve public sentiment towards mining,” Mr. Crittenden said.
The Panamanian government had signed a new agreement with First Quantum into law in November, but amid widespread protests against the deal, Mr. Cortizo directed the country’s top court to rule on the contract’s legality.
Demonstrations against the mine attracted thousands as well as huge international media attention, with movie star Leonardo DiCaprio among those voicing his support for the protesters. The environmental impact of Cobre Panama, located in a densely forested area, emerged as a major issue for voters, particularly as the country endured its worst drought in decades.
Brian Cattell, spokesperson for First Quantum, wrote in an e-mail to The Globe and Mail that the company is looking forward to a dialogue with the new administration, and working to find a resolution that is in the best interests of Panama.
After Cobre Panama was ordered to close, First Quantum launched arbitration proceedings against Panama, a process that typically takes years to play out. The Vancouver-based miner is seeking a minimum of US$20-billion in damages, based on the fair market value of its initial investment. Toronto-based Franco-Nevada Corp., which helped finance Cobre Panama through a streaming deal with First Quantum, is separately seeking US$5-billion from arbitration.
Before the shutdown, Cobre Panama accounted for about half of First Quantum’s revenue. The company’s financial condition deteriorated so much after the mine’s closing that it declared itself a “going concern risk,” earlier this year. First Quantum in February refinanced US$2.2-billion of its debt and raised billions more in a financing that has given the company significant financial breathing room for the next few years.
Last year, The Globe and Mail reported that Barrick Gold Corp. approached First Quantum to discuss a deal that could have seen the Toronto-based gold miner acquire the company. In an editorial board meeting with The Globe last week, Barrick chief executive Mark Bristow was asked about his willingness to get involved with First Quantum, but he indicated that he is extremely cautious.
“First Quantum is a mess,” he said.
The company’s licence to operate in Panama remains in question, Mr. Bristow added.
“I’m not sure where this all lands.”
Located 120 kilometres west of Panama City, Cobre Panama accounted for about 5 per cent of the country’s GDP. The mine started production in 2019, and cost about US$6.8-billion to build. Credit agency Fitch downgraded Panama’s debt rating in March, citing in part the impact the mine closing is having on economic growth.
Shares in First Quantum fell by 1.1 per cent in trading on the Toronto Stock Exchange on Monday to close at $18.37 apiece. The stock has lost more than 50 per cent of its value since last July.